A packed panel of last-mile logistics experts came together at NAIOP’s I.CON: The Industrial Conference to tackle the crucial last mile and share strategies on how to overcome logistics challenges in New York City. JLL Vice Chairman, Northeast Industrial Region, Rob Kossar led the panel and began by saying that industrial development in the market is supported by a deep and wide variety of population demographics, including:
- Massive daytime population density.
- Large concentrations of high net worth millennials.
- Large pockets of high disposal income in the surrounding counties.
“Every retailer who does business in New York is going to be doing same-day delivery in the next three years, or they’ll cease to exist. And they’re going to have to do it from urban distribution spaces,” Kossar said.
In short, accessing Brooklyn and Queens from traditional huge distribution centers in New Jersey is impossible when a two-hour delivery is required.
Among the biggest conundrums? New York has a finite number of locations for new development. This makes redevelopment of urban New York spaces hot. A large number of buildings in the existing stock are old or outdated – the average age of New York industrial buildings is 70 years old. Coupling high demand and limited supply means that when a pocket of space becomes available, companies act quickly (or, as one panelist put it, “birds fly”).
Access, access, access is key in industrial, and Brooklyn is sometimes considered the closest point to the most end-users. But traffic on the Brooklyn Queens Expressway may be inhibiting, so some investors and developers are turning to the Bronx, which has greater access to millennial-heavy Williamsburg, Queens, and even upper and midtown Manhattan. Small-sized industrial spaces (40,000-100,000 square feet) are critical to getting close to customers. With 20,000 condo units in the works for Queens and Brooklyn, these small infill spaces are critical and in high demand.
The panel says that the last mile has been ever-present in New York, with grocers and retailers who have served communities for decades. At some point, due to rising lease costs or the repurposing of older spaces for higher and better uses, these distributors moved across the river to New Jersey. Now they need to get back into Manhattan because of consumer demand – and the bet is when, where and to what extent they’ll come back, perhaps paying twice the market average for a modern, quality building that has long been missing from the market.
What are the challenges for tenants in the NYC market? Parking tops the list; if there is parking included in the lease, expect a rent premium. Direct-loading and the appropriate number of loading docks helps the trucks get in and get out, which eases the labor of getting those trucks loaded and speeds delivery.